Into India

Kerala – great tourism but also good for innovative business

India got its largest startup ecosystem Sunday when Kerala Chief Minister Pinarayi Vijayan inaugurated a facility housing incubation set-ups across a string of segments in modern technology.

The Integrated Startup Complex under the Kerala Startup Mission (KSUM) includes the ultra modern facilities of Maker Village that promotes hardware startups, the BioNest that promotes medical technologies, BRINC which is the country’s first international accelerator for hardware startups; BRIC which aids developing solutions for cancer diagnosis and care, and a Centre of Excellence set up by industry majors such as UNITY.

After the completion of three more projects, Kerala will have startup and incubation space of 5 lakh sq ft, which will be the largest of this type in the world.

No less than 30 applications for patent has gone from startups with the 13.5-acre TIZ, the CM noted, lauding it as a sign of the high-quality work in the zone. Simultaneously, Kerala was sensing increasing optimism in boosting software export from the state.

M Sivasankar, secretary, IT (Kerala), pointed out that the entire space at the TIZ facility has been sold out.

“This has never happened in our country, where it usually takes a couple of years for an incubator to get the whole area occupied,” he said. “The first three floors of the new complex have been furnished, while the rest of the floors have already got allotted to various startups.”

“The campus has another incubator complex coming up and it will be opened early next year,” Sivasankar said.

Besides the Maker Villager with its 30-odd startups, the facility has nascent firms working in fields such as biotechnology, computer-aided design, augmented/virtual reality and advanced communication.

So – Kerala is “gods own country” for tourism but also a magnet for innovative business. Worth a visit.

Can Australia make Asia a top priority?

A new study shows that three of the world’s top five economies by 2033 will be Asian, with China number one, India third and Japan fifth. The US will be second and Germany fifth.

This suggests Australia’s trade and investment focus for the next 15 years needs to swing more sharply to Asia.

The study is the World Economic League Table, published annually by the Centre for Economics and Business Research, or CEBR, in London.

It would be timely for Australia to radically change its approach to diplomatic appointments – our “plum” diplomatic postings remain Washington and London, but should now shift to Beijing, New Delhi and Tokyo.

We need to boost our presence in other Asian economies too – South Korea is set to become the 10th-largest, Indonesia (12th), Thailand (21st), the Philippines (22nd), Bangladesh (24th) and Malaysia (25th), all making the top 25.

On top of this, one of the world’s greatest transformational projects is on our doorstep – China’s Belt and Road Initiative might be controversial but is a growth driver. Infrastructure spending is set to increase from US$11.5 billion, or 13.5 percent of global GDP last year, to US$27.4 billion, or 15.5 percent, by 2032, largely due to this initiative.

While China is high profile, quietly building a supersized economy is India which in 2018 remained ahead of China to retain the world’s fastest growing large economy status.

Yet Australia has largely put India on the backburner, unable to complete the kind of trade agreements that we have with China and other Asian countries. This low focus on India needs to shift over the next 15 years of growth there.

David Morris, and Australian who chairs the United Nations Asia Pacific Business Forum, agrees that Asia is now vitally important to the global economy. His consistent message is: “We are in the midst of the biggest global economic shift in memory, with East Asia now driving growth in the world economy”.

The Australian specialist India advisory firm India Avenue Investment Management points out that Indian equity markets performed quite well relative to their emerging market and developed market peers – yet our focus has been on three regions which fared particularly poorly in 2018 – China, Australia and Emerging Markets (which China dominates).

Granted, Australia has shifted focus to Asia, as shown by the 2016 opening of our largest and most expensive embassy in Jakarta, Indonesia at a cost of A$415 million and hosting 500 staff.

Despite this, one of Australia’s major research houses, the Lowy Institute, has long claimed that our Department of Foreign Affairs and Trade is “under-resourced over a period of several decades”.

The symbolism at the very top suggests we are struggling against the shift to Asia – former Ministers and Prime Ministers almost salivate at the chance to take the top post in London or Washington.

It is time to shift this focus to New Delhi, Beijing and other parts of Asia – while these are the epicentres of our future, it is unlikely ex politicians will pursue them as vigorously as they chase the old world.

Perhaps appointing Julie Bishop as our Ambassador in a major Asian country would send better signals?

Symbolism is important, especially for investment and trade, so sending top ranking former politicians into Asian posts could have a powerful effect – so long as we give them the resources to do the job.

Knowledge of Australia remains dangerously low across the whole of Asia, including Commonwealth partners such as India and Malaysia. We are variously seen as a “kangaroo nation” or a giant mine and even a “white enclave” (admittedly said more in private these days), showing ignorance of our major multicultural achievements. This ignorance is dangerous for diplomatic and defence relationships and is restricting our trade.

Education and tourism are the two sectors that can really turn this around, giving Asians a first-hand experience of what a great country Australia is. We are boosting efforts in both, but do we really grasp the vast potential size of the market?

Only by shifting our diplomatic resources more and more to Asia will we gain a true understanding of these markets and how we can build a positive future together.

India the place for investors in 2019

According to India Avenue Investment Management, India is the growth market for investors this year – with a young population and strong economy. The company is based in Sydney and has an office in Mumbai.

India Avenue are very keen on the Indian banking sector and consumption providers.

Here are their thoughts:

“We expect companies in the Banking, Consumption and Industrial companies to outperform in the first half of 2019. Provisioning in Banks have bottomed out and we expect earnings to improve significantly from here, particularly given credit growth.

“Our top picks here are ICICI Bank, HDFC Bank, Kotak Bank, State Bank of India, IndusInd Bank and Axis Bank.

“Consumption will also remain a dominant theme as interest rate cuts are delivered, retail credit growth increases and the benefit of handouts to rural India (Government initiatives, populist measures and farm loan waivers) lead to a pick-up in spending.

“Our top picks here are Mahindra and Mahindra (autos/tractors), Dabur (consumer health products), Britannia Industries (biscuits, milk and basic foods), Crompton Greaves (consumer products) and Sun TV (media/television).”

More information:

https://indiaavenueinvest.com/

Cricket shows business and politics how Australia and India should get closer

Can Australian business wake up to new realities – for example, if you do not have an India engagement strategy then you are missing out on the growth centre of the world.

Cricket had to wake up too – India is now the epicentre of cricket and the biggest contest in town is Australia and India.

The cricket battle between Australia and India has provided special moments and lots of insights into how our two countries should relate.

First, enjoy the difference – both teams clearly enjoyed their interaction and cultural differences.

Second, go beyond the basic commitment – the Tweet and pic of the series was Indian wicketkeeper Rishabh Pant and Bonnie Paine when he was babysitting the Paine children.

Third, adapt to each other – Australia toned down the sledging and India toned it up, thereby meeting in the middle.

Fourth, sometimes we can all be direct – Indians are known as “indirect” communicators but Captain Kohli and his bat conveyed a direct message when he made a century – “my bat is talking!”

Fifth, conflict can be followed by harmony – both teams crossed the line but quickly resumed the contest as normal, tough but not over the top.

Sixth, crowds can tell you a lot about a country – Australia is an increasingly successful multicultural community and enjoying it.

Now the cricket is done – how about Aussie business and politics – can they learn too, and engage more closely with India?

Climate Change – India turns away from coal as Australia and Adani still dream of selling them more coal

More evidence that the Australian and Adani dream of selling coal to India is just a fantasy.

India is increasingly shifting towards green energy

Simon Mundy of the Financial Times reports that Indian power companies spent much of the past decade rushing to build coal-fired power plants in anticipation of surging electricity demand as economic growth took off.

You can see the article at https://on.ft.com/2GShz3Q

Now, many of those projects are mired in deep financial distress and private investment in coal power has ground to a near halt – making the Australian and Adani dream of selling more coal to India look deluded.

Mundy writes that the biggest driver of long-term uncertainty for the industry is one that few anticipated 10 years ago: an explosive take-off in the renewable power sector, as India joins the global push to tackle climate change by shifting towards green energy.

Soon after taking power in 2014, Prime Minister Narendra Modi’s government set a target of increasing India’s renewable energy capacity by 2022 to 175 gigawatts, equivalent to 40 per cent of the country’s total power capacity at the time of the announcement.

Indian coal power producers are considering renewable projects when they build new capacity © Getty

Mr Modi’s ambitions were stoked by a dramatic fall in the price of solar panels after a huge expansion of production in China, which is seeking to capitalise on the international drive to cut emissions. This was steadily making the cost of electricity from solar plants — once far more expensive than coal power — more competitive with plants running on the dirtiest fossil fuel.

Making a mockery of Australia’s long hopes of selling more coal to India, in the 2017 financial year, newly added renewable energy capacity overtook new coal-fired capacity for the first time. The renewable push attracted major investors such as Japan’s SoftBank, whose consortium last year sealed a deal that stunned the industry.

Mundy goes further on coal – this shift in the industry’s economics means that coal power — once one of the hottest prospects for Indian industrialists — is now a space where most fear to tread.

“You’d have to be quite courageous to invest in coal at this point,” said Navroz Dubash of New Delhi’s Centre for Policy Research.

Does Australia realise that India has plentiful supplies of coal in its eastern region?

This year, state-run NTPC — by far the biggest thermal power producer in India — has cancelled several plans for large coal projects, including one for a giant 4GW plant in southern Andhra Pradesh state.

Increasingly, large private-sector coal power producers are looking at renewable projects when they build new capacity.

Even Adani, which is in big strife with plans to mine and export coal from Australia, has invested more than $600m in a solar plant in Tamil Nadu — a southern state with abundant sunshine.

There is no longer an economic case for the highest-cost coal plants in inland areas of the country’s south and west, which are forced to rely on coal expensively transported over long distances from the northeastern coalfields, said Tim Buckley at the Institute for Energy Economics and Financial Analysis.

Credit Suisse estimates that more than half the debt owed by power companies is now stressed — with interest payments exceeding profits — amounting to a total of more than Rs2.5tn ($35bn).

Several coal-focused power groups are being dealt with under India’s new bankruptcy code, which will force them into liquidation if a swift sale is not agreed. Indian authorities have an incentive to minimise the distress in the coal power sector. State-controlled banks, reeling from a surge in non-performing corporate loans, are heavily exposed to this industry.

But the Modi Government is clear in favouring renewables, leading to long-term self-sufficiency, lower costs, more competitive industry and better climate outcomes. Even though major corporates like Tata and Essar are struggling with the economics of coal power plants, the Government remains unwilling to shift from renewables.

Which makes the Australian/Adani dream of creating our biggest coal mine and shipping it all to India look like a case of sticking to an old fantasy while the target market has moved on. Can Australia move on too?

Because Australia is expected to commit about A$1 billion towards the scaled down A$5 billion mine project, the Australian Prime Minister and the Queensland Premier need to have some serious discussions with Adani Group – and possibly Indian Prime Minister Modi – to get answers to some disturbing questions:

If Adani is simply planning to supply coal to its own power stations in India, what tiny fraction of the Carmichael coal reserve does this represent?
Does Australia face the worst of all worlds with no royalties and vastly fewer jobs than expected?
Exactly how many jobs will Adani Group commit to long term?
What would be the environmental degradation costs of the project?

With these answers both governments can assess the risk of being left holding a distressed or potentially stranded asset of no value to anyone.

Right now our politicians seem to want to resist the future, rather than embrace it.

India retains world fastest growing economy, while Apple to boost manufacture in Tamil Nadu

As Apple struggles for impact in India, one of their key contract manufacturers, Foxconn, will invest in new production lines to manufacture certain iPhone models in its factory in Sriperumbudur near Chennai, Tamil Nadu, according to the Economic Times.

Apple refused to comment on the development while Foxconn India officials were unavailable for comment. Lack of local manufacture is holding back the traditional “single store” marketing push of Apple, so this move is a timely one.

The move certainly reinforces the status of Tamil Nadu as a specialist manufacturing state, with cars, phones and IT on the list.

It was also announced in January that India remained ahead of China to retain the tag world’s fastest growing large economy withstanding several ups and downs, spike in oil prices and global trade war like situation during 2018.

According to Niti Aayog (national economic planning body) Vice-Chairman Rajiv Kumar, the focus of the government in 2019 will be to expedite reforms with a view to accelerate growth.

“India will grow at around 7.8 per cent in the next calendar year and investment cycle that has already started picking-up will gather further strength and we will see more private investments,” Kumar said.

Looks like a good year to review your India engagement strategies, and put some energy into the Indian market.

The Jamnalal Bajaj Awards promote the values of the great Mahatma Gandhi

Many things amaze me in India and one that both amazes and inspires is the Jamnalal Bajaj Awards – for the “unsung heroes” who inspire many through selfless effort in the tradition of Gandhian values.

My good friend eminent scientist and regular visitor to Australia, Dr R A Mashelkar, is Chairman of the Selection Committee of the Award for Application of Science and Technology for Rural Development and a Member of the Council of Advisors for the whole scheme.

Dr Mashelkar said: “The fundamental issue is about Gandhian values and creating an inclusive society by dismantling inequalities.”

The Nobel Laureate Kailash Satyarthi is one of the trustees of the Jamnalal Bajaj Foundation and a jury member for the Awards: “Changemakers firstly need to understand the trend of the change and then change the direction to positivity, righteousness, justice, equality and humanity.”

My country – Australia – has seen a decline in the reputation of major institutions and corporate Australia is in the firing line as the Banking and Finance Commission finds unethical behaviour is rife. Beyond the so-called ethic of “building shareholder returns”, no Australian business leader has had anything constructive to say on corporate ethics. Very disappointing. We could learn much from this foundation and the great Mahatma Gandhi.

More information about this wonderful foundation and the awards is at http://www.jamnalalbajajfoundation.org/

Apple could be a case study in how not to do business in India

Apple is struggling with its iPhone in India and has not adapted to the Indian market, while Oppo (China), Samsung and Nokia have. Noticed the Oppo logo on the Indian cricket team? Oppo from China is branding the Indian cricket team – smart positioning.

India is estimated to have 39 million new smartphone owners this year, according to eMarketer. More than 75% of the smartphones sold in the country cost less than $250 and 95% cost less than $500, analysts estimate. Most sales are less that $300 and come from local, unaffiliated shops in the countryside, where the majority of Indians live.

Among Apple’s current lineup, its lowest-priced phone in India is the iPhone 7, which typically costs around $550.

It is missing the target market on price, positioning and product – the features list is not right for India.

To succeed in India, you need product and marketing for India – that is the message of the Apple failure. Of course, the obstacles to the traditional Apple model of fully owned and branded stores are immense in India – so Apple needed to look for a new innovative model, but missed this boat.

The company hasn’t had the successes of fellow U.S. tech giants, who have found ways to claim some of India’s hundreds of millions of new consumers. Amazon.com Inc. has become a leading e-commerce player in the country. Alphabet Inc.’s Google and Facebook Inc. dominate online advertising. Netflix Inc. and Match Group Inc.’s Tinder are already among the biggest earning apps.

With 1.3 billion consumers, the country is the world’s biggest untapped tech market.

Just 24% of Indians own smartphones, and the number of users is growing faster than in any other country, according to research firm eMarketer.

The number of iPhones shipped in India has fallen 40% so far this year compared with 2017, and Apple’s market share there has dropped to about 1% from about 2%, research firm Canalys estimates. Some analysts call it a rout.

The list of market entry errors by Apple is impressive – wrong pricing in a price sensitive market, reluctance to change its traditional business model for selling the iPhone, rather than make a range of handsets, it has prioritized a limited number of coveted products, sold at high prices. The iPhone’s software features, like iMessage and AirDrop photo sharing, aren’t as big a draw for emerging-markets buyers, who often use Facebook and its WhatsApp messaging service to connect with friends and consume news and other content.

While competitors reacted to local consumer concerns—increasing battery life, for example, and offering less expensive models—Apple took an inflexible stand on its pricing and products.

The thing Apple is missing as it searches for market share in emerging markets is that if you can make it in India you can make it in the rest – Indonesia etc.

Meanwhile, competitors like China’s OnePlus, Xiaomi Corp. —sometimes called “the Apple of China”—and BBK Electronics Corp.’s Oppo and Vivo flooded India with smartphones, many of which cost less than $200. Some signed on Bollywood and cricket stars, among India’s biggest celebrities, to promote their products – and Oppo is on the cricket team shirts.

Unlike Apple, which typically spurns market research, competitors have conducted extensive on-the-ground research in India into local consumer habits, quickly incorporating functionality like special cameras for taking better selfies.

Now, that’s how you get into India – do your homework including market research, adapt to the market, make connections with existing sales and distribution channels, maximise what you can make there, utilise the local selling formats, adjust your product features and pricing and then link marketing plans with what works locally – cricket and Bollywood.

Blackstone is “betting big” on India

A reform-oriented government, weak rupee, bumper exits and newer opportunities in bankruptcy and structured capital solutions should provide Blackstone, the world’s largest private equity firm, the ideal environment to re-position itself as an aggressive acquirer of local assets in 2019, said chairman Stephen Schwarzman, in a recent interview with the Economic Times.

“We have done remarkably well as a firm since 2015… became the largest commercial landlord in India,” Schwarzman told ET in an interview.

Blackstone, which globally manages about $457 billion, changed its strategy after the initial turbulent years when many of its infrastructure investments went south. Today, India is the top performing geography globally for the firm.

From minority investments, the switch to buyout deals helped it stand out. The firm has the philosophy of building businesses and not investing in businesses.

Beyond technology or other export-oriented sectors that earn in foreign currencies, the focus is on domestic consumption – financial services and consumer companies.

https://economictimes.indiatimes.com/markets/stocks/news/time-is-right-to-bet-big-on-india-stephen-schwarzman-chairman-blackstone/articleshow/67085650.cms?from=mdr

Modi Government to do more on “ease of doing business”

Watch out for more improvements in India on “ease of doing business”. India’s rise in the World Bank “Doing Business” rankings from 142 to 77, over the last four years, was stunning – but the government wants more.

The Prime Minister, Shri Narendra Modi, recently chaired a high-level meeting to review progress with regard to “Ease of Doing Business.”

The meeting was attended by senior Union Ministers related to economic matters; Maharashtra Chief Minister Shri Devendra Fadnavis; Lieutenant Governor of Delhi Shri Anil Baijal; and senior officials from the Union Government, Maharashtra Government and Delhi Government.

Subjects such as construction permits, enforcement of contracts, registering property, starting a business, getting electricity, getting credit, and resolving insolvency came up for discussion.

The Prime Minister stressed the need to improve last mile delivery, and focus on streamlining procedures, which would improve not just the “Doing Business” rankings, but also increase the “Ease of Living” for small businesses and the common man.

He said this is extremely important for India, as an emerging and vibrant economy. He also spoke of the tremendous global interest about the rise in India’s “Doing Business” rankings.

So – in 2019 there should be more news on ease in doing business with India.